Alternative Investing

Optimal Currency Hedging for International Equity Portfolios

October 18, 2018 - Jacob Boudoukh Matthew P. Richardson Ashwin Thapar Franklin Wang

We explore currency exposures in international equity portfolios by decomposing the optimal currency portfolio into a “hedge portfolio,” which minimizes equity volatility, and an “alpha seeking portfolio” based on the well-documented currency styles of value, momentum and carry.

Equities

Empirical Asset Pricing via Machine Learning

October 17, 2018 - Shihao Gu Bryan T. Kelly Dacheng Xiu

We show how the field of machine learning can be used to empirically investigate asset premia including momentum, liquidity, and volatility.

Tax Aware

The Tax Benefits of Relaxing the Long-Only Constraint: Do They Come from Character or Deferral?

October 15, 2018 - Nathan Sosner Stanley Krasner Ted Pyne

Are there tax benefits from relaxation of the long-only constraint? If so, what are the sources? To answer these questions, we decompose the total tax benefit (or liability) of a strategy into two components.

Alternative Investing

Risk Adjusted Performance of Middlemen in Housing Markets

October 10, 2018

Do housing market asset flippers outperform? We study the risk-adjusted returns of asset flippers operating in the housing market of Los Angeles County with respect to both investments in the U.S. stock market and in a passive mutual fund tracking a representative U.S. REIT index.

Trading

Trading Costs

August 23, 2018 - Andrea Frazzini Ronen Israel Tobias J. Moskowitz

Using live trade data from a large institutional money manager over a 19-year period, we find actual trading costs to be an order of magnitude smaller than previous studies suggest.

Asset Allocation

Long Horizon Predictability: A Cautionary Tale

June 18, 2018 - Jacob Boudoukh Ronen Israel Matthew P. Richardson

We show there is much less evidence of long-horizon return predictability than existing research suggests, casting doubt over claims about forecasts based on stock market valuations and factor timing.

Factor/Style Investing

Time-Varying Leverage Demand and Predictability of Betting-Against-Beta

June 13, 2018 - Esben Hedegaard

We test the predictability of betting-against-beta (BAB) strategies and find that they perform better when past market returns have been high.